Summary

Prioritizing debt can help to identify which debts must be paid off first. Paying cards off in the order of their interest rates is a useful strategy, and experts say that those with savings might be better off paying down debt, particularly if the savings are in a low-yield instrument.

Original source:
http://www.boston.com/business/personalfinance/articles/2005/04/13/finance_taking_charge_of_your_credit/

Details

• It's becoming more important than ever for consumers to take control of their credit lives and start paying down debts.
• Those credit card balances -- topping $9,000 per household, according to CardTrak.com -- are about to become even more expensive to carry than they already are.
• Bankruptcy laws are about to change, making it harder to wipe out debts in the event of a family emergency.
• And a number of problems have surfaced recently in the credit counseling industry, long thought of as a relief valve for over-indebted consumers.
• -- If you're spending more than 25 percent of your take-home pay just paying credit card bills.
• Unless you're in the midst of a family health or unemployment crisis you expect to see resolved soon, there is no good reason to carry balances on credit cards.
• They're just too expensive, and it's not good for a family budget to pay interest on consumable items like nights out, clothing, and kids' sporting goods.
• The better agencies offer complete financial advice and education; the worst don't even follow through on their promises to clean up your credit.
• Many charge hefty fees, and the ways in which they dole out payments to your creditors can bypass some creditors or cause your credit score to fall.
• If you're at the point of desperation, choose a credit counseling firm -- carefully -- suggests the National Consumer Law Center, a rights group that has done a lot of research on these agencies.
• Look for an agency that offers a full complement of services, including credit education and budgeting help.
• Stay away from agencies that pay their representatives bonuses or commissions for signing up customers for debt management plans.
• If that's not possible, put your cards in interest-rate order, and pay minimums on all but the highest rate card.

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